October 15, 2012

As Ebook Price Fixing Case Closes, Apple And Amazon Customers May Get Refund

The ongoing dance between Amazon, Apple, a handful of publishers and the U.S. Department of Justice (DOJ) may be drawing to a close soon. Over the weekend, Amazon and Apple customers received emails explaining they that may be entitled to some cash back from their ebook purchases.

The Department of Justice took Apple and 6 other publishers — including Hachette Book Group, HarperCollins and Simon & Schuster — to task over allegedly colluding to fix the prices of ebooks and compete directly with the original ebook creator Amazon.

If the judge approves the settlement proposed by the publishers, Amazon and Apple customers will be the beneficiaries, receiving either credit or refunds to make up for overpaying on their initial ebook purchases. Neither Amazon nor Apple, however, were parties to this lawsuit.

According to the email sent by Amazon to their Kindle users, these customers could see a refund in their accounts between 30 cents to $1.32 for ebooks purchased between April and May 2012. Only those books purchased from the three aforementioned publishers (who have decided to settle) will be eligible for the refund.

In an email from the State Attorneys General office, Apple ebook customers were told they could expect similar credits in their accounts, pending approval of the settlement.

In addition to giving money back to customers, this settlement would also limit these publishers´ ability to set their ebook prices in the future. According to Amazon´s email to their customers, this could mean lower prices.

“We think these settlements are a big win for customers and look forward to lowering prices on more Kindle books in the future,” read the email.

As a part of the agreement, the three publishers have agreed to pay a total of $69 million back to the customers. These refunds won´t be made available until the judge approves the settlement at a February hearing. However, according to the website ebooksagsettlements.com, to which the email directs customers who have questions, these refunds might take even longer to arrive.

“Payments will be distributed if the Court grants final approval to the Settlements and after any appeals are resolved. If the Court approves the Settlements after a hearing on February 8th, 2012, there may be appeals. We don´t know how much time it could take to resolve any appeals that may be filed,” states the website.

This case was the result of several publishers moving from a traditional wholesale model to an agency model similar to Apple´s iTunes and App Store models. Prior to ebooks, publishers sold their titles to retailers like Amazon at wholesale prices. The retailers were then free to set whatever price they wished, resulting in Amazon earning quite a bit of dominance by selling their books at $9.99, a situation which troubled a number of publishers who became concerned that the online retailer was becoming too powerful.

When Apple burst onto the scene with the launch of their iPad, they had already struck deals with publishers to adopt the agency model, wherein these publishers set their own price for the books while the retailer received a 30-percent cut. Under this model, it was no longer feasible for Amazon to continue selling at the $9.99 price point.

The three publishers in question continue to deny any wrongdoing, but have agreed to settle this suit to avoid an expensive trial.